The federal government has many laws in place to prevent American’s from being illegally discriminated against.  Among them are the Civil Rights Act, Community Reinvestment Act, HMDA, ECOA, and the Fair Housing Act.  All serve their own purpose, but many loan originators do not know or understand the differences or the value that each one provides.

The Fair Housing Act is Title VIII (8) of the Civil Rights Act. The Civil Rights Act was the first major legislation put into effect in 1866 about discrimination and the Fair Housing Act amended it 1968. The purpose of the Fair Housing Act was to make it illegal to deny renting, leasing, buying or selling of a residence based on a discriminatory reason.

There are seven protected classes under Fair Housing. Family Status, Race, Religion, National Origin, Disability, Sex and Color. As you know, the above factors have no basis on whether or not a borrower has the ability to make their rent, lease or mortgage payment. Therefore, none of the aforementioned should be considered when determining if a property will be rented, leased, bought or sold to a person.

Today most mortgage laws fall under the authority of the CFPB, Consumer Financial Protection Bureau. However, the Fair Housing Act remains under the Department of Housing and Urban Development (HUD).  The CFPB monitors the laws and practices as it relates to financing. However, if a person is denied renting or leasing a residence, that denial would have nothing to do with financing. It does have to do with housing. Therefore, the law mostly specific to housing stayed under the department of Housing and Urban Development.

As with most laws or rules in the mortgage industry, there are exceptions.  And the Fair Housing Act is no exception to that rule. There’s an exemption called the Mrs. Murphy Exemption. This exemption allows for one who is renting out a room in their own home or a unit in their 2-4 unit property to not follow the restrictions under the Fair Housing Act.  Also, if you own 3 or fewer properties and are not using a Real Estate Agent or a Property manager to manage said property, you can discriminate on whom you rent or lease that to. Essentially, the Mrs. Murphy exemption applies in the following circumstances:

1. An individual is renting out a room in their owner occupied residence.

2. An individual is renting out a unit in their 2-4 unit property and homeowner occupies at least one unit.

3. If the homeowner rents out a SFR and the owner owns no more than three such homes at one time, No discriminatory advertising is used, and no real estate broker (or any real estate professional) is used as the property manager.

There you have it.  Those are the rules under which one can and cannot discriminate against a person when it comes to renting, leasing, buying, or selling real estate properties. These rules vary from one state to the next, therefore it’s very important to know the rules where you are operating. For more information on the Fair Housing Act in your state go to or

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